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FAR EAST


Fed up with slow-steaming ships and expensive airfreight from Asia to Europe? From 18 March there will be an alternative, in the shape of DB Schenker’s through rail service from China to Europe. Prompted by the electronics manufacturers, DB Schenker – which of course is part of Europe’s largest rail freight operator - will offer a weekly service from cities such as Chongqing in the centre of the country, or Shanghai and Beijing right through to places in Germany such as Duisburg, Amsterdam or Rotterdam. VP sales and key account manager, Asok Kumar explains: “We’re trying to position in between air and ocean and also to promote the ‘green’ element of rail,” he explains. It will also be much cheaper than airfreight he says. Transit time from China to central Europe will be 16 days, significantly faster than shipping services taking 23-25 days, even without taking into account the


time it takes to get to and from inland locations in China or Germany. While frequency will initially be weekly – compared with daily departures by sea – DB Schenker hopes to push frequency up to three times a week fairly soon.


There are two routings, one via


the Transiberian railway through Russia and the other through the southern CIS countries. Either way, there would be a two breaks of gauge en route; the Chinese and western European railways are 1435mm standard gauge while the railways in Russia and the CIS are 1524mm gauge. The service will be available eastbound as well as westbound though the traffic flow is expected to be predominantly the latter.


DB Schenker is also stepping up its intra-Asian trucking network. Services now link South China with Vietnam, Cambodia, Malaysia and Singapore “and we are looking to beef them up


further” says Kumar. The ASEAN pan-Asian economic community has been pushing for smoother cross-border links for some time and customs computer systems have been improved, to the extent that services are now almost problem-free. The one remaining issue are hijackings, mainly in Malaysia, where security procedures have been stepped up.


Another development, says Kumar, is an increase in regional trade between Asia and Australasia and India.


DB Schenker commercial


director, David Harrison adds that the forwarder, which has one of the strongest networks in Asia of all the multinational forwarders, has lately been expanding northwards and westwards in China, with a growing amount of business in the likes of Dalian, Shenyang and Harbin. “We are definitely seeing a movement in manufacturing in that direction. That said, Hong Kong and


Yantian, which are the historic bases for UK buying houses, are still strong.” DB Schenker has also put a manager in its Beijing office to help coordinate the activities of the various offices around China, which is still a country of challenges as far as inland distribution is concerned. Business in China is reasonably strong but David Harrison says he is slightly baffled by the amount of extra capacity the ocean carriers are putting onto the


Far East/Europe trades,


considering the generally flat or even negative forecasts for retail trade growth in many European countries. “Cosco, Hanjin, K Line, Maersk, MSC and others are all putting in more capacity – so I think it could be something of a buyer’s market.”


The airfreight market has also softened since Chinese New Year, though there hasn’t been the same large injection of extra capacity as in ocean. “What we


Lufthansa takes up the slack in Japan


The Far East to Europe airfreight market was still growing strongly before the recent earthquake. But it was also changing long before the string of disasters that beset the country, says Lufthansa’s head of sales planning and marketing for Asia-Pacfic, Benjamin Scheidel. With Japanese national carrier JAL bowing out of the full freighter market, Lufthansa has taken up much of the slack, increasing


freighter flights to


Lufthansa’s Frankfurt hub from seven to 12 a week.


Despite the fact that Japan is a mature market and the strong Yen,


Lufthansa’s own


freight business performed well, Scheidel says. “Load factors from Japan are good,” Scheidel explains. The freighters between Tokyo and Osaka and Frankfurt are not the German carrier’s only links with Japan.


There are also regular A380 passenger flights – despite misgivings, the giant passenger plane is giving reasonably good cargo payloads, well above the 7-8 tonnes expected at first – and an A340-600 link to Munich. In addition, Lufthansa is also marketing the capacity on Austrian Airlines’ 777 passenger flights to Vienna. Efforts by the government to reduce the value of the Yen and boost the country’s exports


have not so far borne fruit but given that both Japan’s exports and airfreight tend towards the high value end of the spectrum this has not had as much of a dampening effect as in seafreight.


Japan also the virtue that trade with Europe is relatively well balanced, by Asian standards. “It’s much better-balanced than China for example – particularly between Germany and Japan,” Scheidel says. Despite JAL’s disappearance as a full-freighter carrier, there is still plenty of upper-deck competition though. ANA is very active in the Japanese market, along with most of the big European carriers. “However, yields are still OK and it’s one of the most stable markets in the regions,” Scheidel believes. A Lufthansa spokesman added that the situation in the Japanese market had not fundamentally changed, despite the earthquake, tsunami and nuclear leaks that beset the country in mid-March. “Even in these days flights to/from Japan are quite full,” he said.


Meanwhile, though, China is still the strongest-performing market, with exports surging by 29% last year. “It’s still booming, but perhaps it’s not going crazy to the extent that it did last year,“ Scheidel declares. Lufthansa serves this market with its own freighters and also those operated in partnership with its Chinese associate, Shenzhen- based Jade Cargo International. Freighters between Shenzhen and Europe have lately been


increased to six a week. There is though, “increasing competition in both Shenzhen and Shanghai”, especially the latter. It seems that the Chinese government wasn’t happy at the European carriers’ large share of the local airfreight market and directed its own carriers to put capacity into those airports. “The market itself is strong, but it is more difficult to fill freighters at the moment than Japan” is the Lufthansa man’s verdict. “It’s certainly more volatile.“ He adds that there is at the same time in China a move away from the classic industrial zone on the eastern seaboard to the west of China, electronics firm Foxcomm being but one of the recent examples.


“Some manufacturers had tried moving to lower cost countries like Vietnam or Cambodia


because of lower


wage costs there, but many are back in China now because there have been quality problems in some of those places – but they are increasingly looking to more western parts of China rather than the east.” The Chinese government is also using subsidies and tax breaks to


encourage a migration of industry.


Lufthansa itself is actively considering extending its freight operations


to Chongqing or


Chengdu, both in the centre of the country. “It does depend on the market and there are no concrete steps to do so at the moment but we are interested,” says Scheidel.


So far at least, Lufthansa and westward


its partners Jade and Aerologic - its Leipzig-based joint venture with DHL – have never had any problems with the Chinese authorities in terms of setting up operations or obtaining bilateral traffic rights.


The future direction of


Chinese government policy will probably be the determining factor in future cargo market growth. There may be moves to raise domestic living standards – recent events in the Middle East can’t have gone unnoticed by the Party hierarchy – and there may in any case be more natural growth at home than in export markets as European and US governments grapple with their own economic problems. “But that said, I think there is still growth in this market – and at the same time, the imbalance is getting better.”


Elsewhere in the Far East, Aerologic and Jade put quite a significant increase in capacity into South Korea last summer. However, it is too early to tell whether the soon to be signed free trade agreement with the European Union will boost this market still further.


Aerologic also puts an MD11 freighter into Singapore and Bangkok and it is possible that there may one day be similar services to Indonesia – it all depends on how the economy and wider political and social outlook develops. Vietnam is another potential boom market, where Lufthansa currently offers passenger


services but where


freighters are always an option for the future.


are seeing,” says Harrison, “is that customers are looking for more cost-effect options, either our Skybridge sea-air product or ‘economy’ type services hubbed in the Middle East or even Moscow with something like a five-day transit time. We have an Integrated Cargo Management system that allows users to work back from their required delivery date and it shows up the possibilities.” Often, the system indicates that there is no need to pay over the odds for a premium service.


There has been something of an improvement in export trade from the UK, though the trade remains skewed in favour of westbound flows. But perhaps a more significant development has been the growth in cross- trades between China and other parts of the world, including other European countries, the US, Middle East and elsewhere. Many of the big UK retailers, facing relatively slow or


no


New Vietnam terminal for Hanjin Hanjin Shipping, Mitsui O.S.K Line, Wanhai Lines and Saigon New Port, have opened a new dedicated terminal at Cai Mep, Vietnam. The 346,000sq m facility is located on the Cai Mep River basin, around 50km from Ho Chi Minh City, and offers 15.8m draft. The twin berths can handle up to 1.15 million teu. Hanjin’s Terminal Business Unit chief executive Se-Hwa Jung commented: “We are expecting a lot from this new dedicated terminal in Vietnam as it


will


soon become a major logistics hub in the region. Many of major carriers such as ourselves


Evergreen, China Shipping and ZIM are to launch a new joint weekly Asia-Europe service in late April 2011, marketed as CES2 by Evergreen and AEX2


General cargo on the Yangtze River totalled 1.39bn tons in 2010, up 22% year-on- year, according to River Administration figures. Containers reached 9.08m teu, up 26%, of which 3.6m teu was foreign trade-related, up 19%. In 2011 general cargo is expected to rise 12% over last year to 1.5bn tons, while


Freight forwarder Agility has opened a branch office in Vung Tau, Vietnam and relocated its Hanoi office to a larger facility. The Vung Tau office caters to the specific


will


are investing in the Intra-Asia market and we believe having a dedicated terminal will help give us a stronger presence.” Hanjin’s Asia-Europe and


Transpacific services are already calling at the terminal and more services will be added soon. Grand Alliance members Hapag-Lloyd (HL), Nippon Yusen Kaisha (NYK), and Orient Overseas Container Line (OOCL) said there would be a direct call at Cai Mep on Loop D of their Asia–Europe service from 30 March. It


offer


a 21-day transit time from to Southampton.


Lines add Xiamen link


by CSCL and ZIM. The nine-ship (8,000/8,5000teu) service adds the ports of Xiamen in South China and Antwerp but there will be no UK call.


Carrying on up the Yangtze


container throughput is forecast to increase 20% to 11m teu. Traffic has been boosted by the growing number of manufacturing companies setting up plants in central and western China in order to reduce costs and tap new markets. However, there are significant challenges involved in transporting goods to such locations.


Agility expands in Vietnam


needs of retail, hi-tech and oil and gas markets. Agility’s Ho Chi Minh office will remain the headquarters for Agility’s operations in Vietnam, Cambodia and Laos.


ISSUE 2 2011 Schenker lets the train take the strain “Processes such as


growth at home, have developed extensive overseas chains and Schenker has been able to bring its expertise to bear in helping them service this demand, says Harrison.


quality


checking, relabelling or repacking would be very expensive to do in the UK, so we have been able to help them do that in China, before despatch.” The forwarder is about to sign another such contract with a major UK retailer that is on an overseas expansion campaign, receiving from various suppliers into a consolidation hub and shipping to Australia, the Middle East and the US. Sophisticated IT systems allow the customer to treat the Schenker warehouses in different countries as their own, but crucially without the heavy capital expenditure or the management time that would otherwise be required to set the operation up.


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